Business & Financial Consultant Resources

Every month we post a new topic in regards to how you can help support your clients and their planning process. Here our our last 6 months of alerts to thank you for visiting our resources site! If any posts prompt questions or if you would like to share a formatted copy with co-workers or your employees, please do not hesitate to give us a call at 919-493-8411 or email our Practice Development Manager at rmcgee@walkerlambe.com. If you’d like to get these alerts delivered monthly straight to your inbox, please visit our Contact Us page to subscribe.

There’s a lot of hype swirling around us to discover our vision. Who we want to be, what we want to stand for, what we want to make and leave for the world, and the impression we want to leave behind. But what happens if you don’t have one?

If you’re not a visionary per se, then it turns out – according to author and leadership guru, Simon Sinek – you’re a lot like the rest of us.

The misconception is that in order to be successful, you have to have a vision. Rather than searching inside yourself for something which may not ever be there, consider instead that most people find a vision. That is, they hear a leader clearly communicate their vision and relate so strongly to it that they say, “Yes! THAT is what I want to do. I want to be a part of that.” Not everyone around us is the next Martin Luther King Jr. or Steve Jobs. In fact, there are more people in the world who have found something they want to be a part of than those who are creating new things to be a part of. The challenge is to actually find it and then create a team that also feels and believes deeply in that vision.

Go Looking For It: It’s perfectly acceptable not to have a vision of your own. If everyone were a visionary, nothing would get done. Visionaries exist to think big things. Their teams exist to make those big things happen. But what most likely will NOT happen is that you “stumble upon” or have your vision “dropped into your lap”. Go look for it. Try on some different visions. Steve Jobs or Bill Gates? Find the one that fits the best. Don’t simply accept one you feel lukewarm about.

Help Your Visionary: The problem most visionaries – and subsequently, their organizations – run into is the inability to clearly communicate their entire vision. Imagine how Sam Walton would feel about the downturn of Wal-Mart after his death in 1992. Visionaries will light the torch. But it’s up to their teams to carry the torch when they are gone. Help your visionary clearly outline what they want for the organization as well as what they DON’T want. Organizations that only last a few generations fall because the new leaders don’t understand the original vision that made it so great in the first place.

Play the Long-Term Game: You’ve found your vision, you have your visionary. Now you need a team to make all those big things happen. Thus begins the hiring process. The way many businesses tend to hire is according to a blind list of skills and assets. We look at resumes, have a few superficial interviews, and decide it’s ok if we hire that way because we can always fire them if it doesn’t work out in a few weeks or months.
Try this on for size: What if you hired people into your business who you could never fire? What would your hiring process look like then? Good organizations hire slowly with the expectation that their employees will never leave and they’d never ask them to because that’s where they fit, it’s where they want to be, and it’s where they do their best work. Rather than recruiting people based on skill sets, what if you hired people based on your values and vision? Play the long-term game and you won’t be disappointed.

Whatever the vision you find (or even if you have your own vision), pursue it doggedly. It is an ever-evolving craft that, with any luck, will keep you moving forward (hats off, Mr. Disney) for many generations.

Savvy planners know that failing to plan is not desirable. Benjamin Franklin is often quoted, “If you fail to plan, you are planning to fail.” Few planners would guess how many of their clients might not have a plan in place. According to a recent survey by Harris Poll, 64% of Americans do not even have a will. Here’s a link to an article in USA Today which discusses the survey. Many would guess their wealthier or more sophisticated clients would not be among those without a plan. But, even wealthy, sophisticated clients can fail to plan.

Sonny Bono is an example of a failure to plan. Sonny Bono was wealthier than average, with an estate estimated at $15 million. He was not unsophisticated. He served as mayor of Palm Springs, California, and later as a member of Congress. He had also been a restauranteur and had his start as an entertainer. Perhaps he was most famous as half of the duo Sonny and Cher (with his second wife). Yet, he had no plan. So, when he died in a skiing accident in 1998, he died intestate.

At the time of his death, Bono was married to Mary (Whitaker) Bono, his fourth wife. He had four children, Christy (with his first wife, Donna Rankin), Chaz (born Chastity)(with Cher), Chesare Elan and Chianna Maria (with his fourth wife, Mary (Whitaker) Bono).

During the intestacy proceeding, another person came forward and claimed to be another of Bono’s children. The estate settled the claim out of court.

Certainly, Bono’s advisors would never have guessed that he was intestate. Yet, he was.

In addition to probate fees that can run well into six figures for an estate of that size, there are many other disadvantages to having your client’s estate go through intestacy and probate as a result of the failure to plan.

Probate is a public proceeding. Thus, your client’s financial life becomes an open book. The public could know the decedent’s net worth and the value of each asset in the estate. That might include real estate, a closely-held business, stocks, bonds or other assets. Not only does all that information become public, but so does the identity of the recipients.

Upon the death of their loved one, the family already has enough to worry about. But, with the public probate process, they are likely to be subject to many solicitations. Some of those solicitations may be merely annoying, others may be unscrupulous.

They family is likely to receive numerous solicitations from realtors, financial planners, brokers, insurance agents, and other professionals who would know how much each family member inherited. Even the nosy neighbors would know the family’s business. They would know of the child the client had out of wedlock or other information which the family might prefer kept private.

Intestacy means the client is leaving their assets in the manner decided by the legislature of their state of residence. Perhaps that’s exactly how the client would have wanted to dispose of their assets. That is extremely unlikely for many reasons.

The dispositive scheme set by the state legislature typically provides for an outright distribution. An outright distribution would be inappropriate for many beneficiaries. A minor beneficiary would require a guardianship or conservatorship, the expenses of which would eat away at the assets. An outright distribution of assets to a special needs beneficiary would result in them losing benefits unless they put those assets in a Special Needs Trust. Even then, at the beneficiary’s death, the trust set up by or for the special needs beneficiary (with assets inherited by the special needs beneficiary outright) would have to reimburse the state for benefits prior to distributing to the beneficiary’s surviving family or other beneficiaries. On the other hand, if the decedent had directed the assets to a special needs trust for the beneficiary, the trust would not have to reimburse the state at the beneficiary’s death.

If the assets were distributed outright to the beneficiaries, this could prove problematic, even if the beneficiary were not minors or special needs beneficiaries. The beneficiary might not be able to manage their money due to a variety of reasons. The beneficiary might have addiction issues or simply might be irresponsible with money. If the assets go outright, there is no protection for the beneficiary. On the other hand, if the client leaves the assets in a trust with someone else as the trustee, the trustee could manage the funds and distribute to the beneficiary as appropriate. If the assets are not dissipated, then advisors might be able to assist the trustee in the preservation and growth of the assets.

Even for a responsible beneficiary, it may be desirable to leave assets in trust. Leaving the assets in trust can protect those assets from a future divorce by the beneficiary. Further, a trust could protect the assets from creditors of the beneficiary.

As discussed in last month’s alert, retirement assets comprise a large portion of most Americans’ total wealth. If there is no plan and retirement assets have no designated beneficiary, then they will be forced to be distributed much more rapidly than otherwise required. This would result in an unnecessarily rapid diminishment of the assets due to income taxation.

Even if a beneficiary is named, assets are still not protected from creditors of the beneficiary. In Clark v. Rameker, the U.S. Supreme Court ruled that asset protection for retirement assets under bankruptcy law does not extend to inherited retirement assets. If a trust providing creditor protection for the beneficiary were designated as the beneficiary, the assets could be protected from creditors.

Protect your client and their assets by encouraging them to plan.

The attorneys in our firm are experienced in all aspects of estate planning and trust administration. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding asset protection, as well as estate tax, income tax, gift tax, and generation skipping tax, and all types of estate planning strategies and tools. You can receive more information about a complimentary review of your clients’ estate plans by calling our office.

Retirement assets comprise a large portion of most Americans’ total wealth. By March 2015, retirement assets hit $24.9 trillion. That’s a lot of money! The key to maximizing and maintaining that large chunk of your clients’ wealth is to keep the money in the retirement plan for as long as possible.

There are two reasons it is normally best not to withdraw retirement assets for as long as possible. The first reason is asset protection. As long as the assets are in a retirement plan (like a 401(k)) during the client’s lifetime, the assets are completely protected from creditors in bankruptcy under the federal Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCA”). If the assets are in an IRA, instead of a retirement plan like a 401(k), the assets are protected in bankruptcy up to a minimum of $1 million (adjusted for inflation) pursuant to the federal law. There may be further protection from creditors under state law. However, under the U.S. Supreme Court case of Clark v. Rameker, asset protection under BAPCA does not extend to inherited retirement assets. The protection applies only during the lifetime of the “Participant,” in other words, the person who contributed the assets.

The second reason is income taxation. Retirement assets, including all growth on the assets, are subject to ordinary income taxation upon withdrawal (unless the assets are in a Roth 401(k) or Roth IRA). This is true even if the growth on the assets is due to capital appreciation which would have been taxed at a lower capital gains tax rate if held outside a retirement account. Depending upon the client’s income tax bracket, income taxation can reduce the assets by more than 40%, not including any state income tax.

During your clients’ lives, they can defer the taxes by keeping the assets in their retirement accounts for as long as possible, while being sure to withdraw their Required Minimum Distributions (RMDs) after reaching age 70 ½. But, after the client’s death, the retirement assets may need to be withdrawn in as little as five years, depending upon the beneficiary designation.

But, if the client names a young beneficiary to receive the retirement assets, the assets may be able to be withdrawn over an extended period of time. For example, if the client names a beneficiary who is age 19 at the client’s death, the beneficiary may pull the assets out over the beneficiary’s 66-year life expectancy. However, there are challenges to naming a young beneficiary outright. A guardianship may be required for a beneficiary under the age of majority. Also, most clients would be reluctant to put a large amount of assets in the hands of a young beneficiary due to a young beneficiary’s lack of discretion and maturity. Also, if the beneficiary is named outright, the assets would have no asset protection under federal law because of the Clark v. Rameker case. This is particularly troublesome given the increased asset protection risk given the young beneficiary’s lack of discretion and maturity.

So, what’s the solution? The client may name a trust for the beneficiary as the designated beneficiary of the retirement assets. If the client names a trust for the beneficiary as the designated beneficiary, rather than the beneficiary in their individual capacity, there would be no need for a guardianship and, if the trust is drafted correctly and other requirements are met, the IRS will “look through” to the trust’s beneficiaries’ ages to determine the Required Minimum Distributions. That solves the stretch part of the problem. But, what about the creditor protection? If the trust is drafted as a fully discretionary trust with a third-party trustee, the assets should gain asset protection, as well.

The client can change their beneficiary designation while they are alive. However, after they are dead, even a court proceeding to modify the beneficiary designation is unlikely to achieve the intended result. In three Private Letter Rulings, 201628004-201628006, a taxpayer’s representatives sought a ruling from the IRS. After the taxpayer’s death, the taxpayer’s representatives went to court to reform the taxpayer’s beneficiary designation to name trusts as the beneficiary, rather than the taxpayer’s estate. The representatives were successful in getting a state lower court order changing the beneficiary designation.

However, the IRS refused to recognize the court order as changing the “designated beneficiary” of the retirement assets. (Under the U.S. Supreme Court case of Commissioner v. Bosch, the IRS is not bound to respect a state court order impacting federal tax matters, unless the ruling has been issued by the highest court in the state.) Thus, in this case the client was stuck with the unreformed beneficiary designation for the determination of the applicable withdrawal period and the Required Minimum Distributions. In this case, this resulted in the estate of the deceased client as the designated beneficiary, resulting in withdrawals of the retirement assets based on the “five-year rule.”

Your clients can make sure their beneficiaries are protected from creditors and income taxation that is more rapid than necessary by using a specially-designed trust as the designated beneficiary.

The attorneys in our firm are experienced in planning for retirement benefits and the drafting of trusts to maximize asset protection and the stretch of payouts from retirement accounts. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding retirement planning, as well as estate tax, income tax, gift tax, and generation skipping tax, and all types of estate planning strategies and tools. You can receive more information about a complimentary review of your clients’ estate plans by calling our office.

Now that the election of Donald J. Trump has become a reality, the question is how that will affect estate taxes and estate planning. The simple answer is that for most Americans there will be no change, as currently 99% of taxpayers are not subject to the estate tax. If the law remains unchanged, the amount a taxpayer can pass free of estate tax in 2017 will be $5,490,000, or $10,980,000 for married taxpayers.

President-Elect Trump has proposed the complete elimination of the estate tax. In its place, he has proposed a capital gains tax, with an exemption from tax for the first $10 million in value. There is a debate among commentators whether the President-Elect’s proposal for the capital gains tax will be immediately at death on appreciated assets over the $10 million mark or whether the capital gains tax will only be imposed when the assets are sold. It seems that the majority of commentators are now leaning toward an interpretation that the capital gains tax would only be imposed when the asset is sold. This would contrast with the Canadian estate tax structure, where the capital gains tax is imposed on 50% of the appreciation from the tax basis of the decedent immediately upon death.

If the latter interpretation is correct, dynastic or legacy planning may become even more popular for wealthier individuals. With dynastic or legacy planning, assets are held in trust for children and grandchildren. The children and grandchildren are given income on a mandatory or discretionary basis and principal at the discretion of the trustee. The trustee could be the child or grandchild or another person or entity. This type of planning would be ideal for wealthy investors who have a large portfolio of appreciated securities or real estate, as the descendants could live off the income and the capital gains tax would be deferred until the time that the asset is actually sold. In theory, the tax could be deferred forever (or at least as long as a trust is allowed to exist under the law of the state where the trust is being administered). Many states have eliminated or weakened the Rule Against Perpetuities to allow trusts to last for hundreds of years, or even forever. States with laws allowing trusts to last for extended periods of time may attract more business in such an environment.

If the former interpretation is true, estate planning attorneys may be looking for ways to get lower tax basis assets out of the estate of the taxpayer during life (perhaps on a tax-deferred or tax-free basis), leaving assets with higher tax basis at death. This would minimize the effect of the capital gains tax to be paid at the death of the taxpayer.
Many Democrats and some Republicans are arguing for the retention of the estate tax as a means of lessening the concentration of wealth in a few individuals as well as providing some funding for rebuilding the infrastructure of America and other social issues.

Thus, the repeal of the estate tax may not be as simple as many have speculated.
If the estate tax is repealed, the Proposed Treasury Regulations for Internal Revenue Code § 2704 discussed in our Fax Alert a few months ago (dealing with advanced estate planning strategies to discount gifts of businesses and other entities) would likely not become Final Regulations, at least in their current form. Many advanced estate planning strategies would remain viable under the new regime, while other estate planning strategies would likely fall out of favor and might end up getting unraveled.

There are many reasons besides potential estate tax or capital gains tax savings to leave assets in trust for children and grandchildren. These include situations where a child has disabilities and cannot receive an inheritance without losing government assistance. Instead, the child could receive the assets in a special needs trust. Another example would be a child with an addiction to drugs, alcohol, gambling, or shopping, who needs a trust where access to the money in the trust is controlled by someone other than the child. A third example would be a child who has proven unable to manage his or her financial affairs. Again, in this example, a third party needs to serve as trustee.

There are also trusts for minors where the assets would remain in trust until the minor attains a specified age. Finally, the parents may want to use trusts for children that contain incentives for the children to behave in a certain manner. Such a trust could provide a stipend or reward if the child maintains a certain grade point average in college, assistance for a down payment on a house if the child can otherwise qualify for a loan through a standard lender, or other distributions.

The attorneys at our firm are experienced in estate tax planning and the drafting of trusts that continue beyond the life of the parents. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding estate tax, as well as income tax, gift tax, and generation skipping tax, and all types of estate planning strategies and tools. You can receive more information about a complimentary review of your clients’ estate plans by calling our office.

Persons with disabilities have been seeking a way to save for college, medical equipment and health care expenses, and retirement without being disqualified from government assistance programs such as Medicaid and SSI (Supplemental Security Income) for decades. Generally speaking, a disabled person receiving needs-based government assistance cannot have more than $2,000 in a bank account or other assets. There are exceptions for a personal residence, one car, certain work-related equipment, and general household furniture and furnishings.

ABLE accounts became a reality with the passage of the Stephen Beck, Jr. Achieving a Better Life Experience (“ABLE”) legislation in 2014. It was hoped that the ABLE legislation would be the solution disabled persons had sought, but the reality has fallen short. For one, the availability of ABLE accounts has been slow to come about. As of November 2016, just five states have ABLE accounts available. Ohio was the first to offer an ABLE account, the Ohio STABLE program. It allows for out-of-state enrollees. Other programs that allow for out-of-state enrollees are: Michigan’s MiABLE program, Tennessee’s ABLE TN program, and Nebraska’s ABLE program. The Florida ABLE United program is limited to residents of Florida. In addition, the restrictions on ABLE accounts make other alternatives, such as a special needs trust, a necessity. However, an ABLE account is a very viable tool that should be considered by estate planning attorneys who specialize in assisting parents and others who are planning for the future of their special needs loved ones as well as disabled persons who have come into money, such as a settlement of a lawsuit related to personal injury.

Parents and grandparents (and other loved ones) can leave an inheritance for a person with a disability through a third party special needs trust. These funds can be used to assist a person on needs-based government assistance without disqualifying them. However, the person with disabilities cannot serve as trustee of (be in charge of) the special needs trust. This is a blessing if the special needs loved one lacks the capacity to manage his or her income and assets, but very frustrating to persons on government assistance who could otherwise manage their own affairs. Furthermore, distributions of cash will reduce (dollar for dollar) any SSI received by the special needs person. Distributions for food and shelter may also cause a reduction of benefits, so they should be evaluated before being made. Any assets left in the special needs trust after the death of the special needs loved one can be designated to go to family members, friends or charitable organizations.

The story is different when the special needs person is trying to create his or her own special needs trust. This usually occurs when the person receives a lawsuit settlement, receives an unprotected inheritance or is fortunate enough to win the lottery or receive some other unexpected lump sum of money. This requires the creation of a first party special need trust. A first party special needs trust cannot be established by the disabled person – it must be created by a parent, grandparent, guardian or a court.

If the court is creating the special needs trust because of a litigation settlement, the court will often maintain jurisdiction over the trust – which means the trustee will have to provide accountings to the court on a periodic basis. Because the government is allowing the disabled individual to maintain eligibility for government assistance despite having assets over the $2,000 limit, the first party special needs trust must be drafted to require the repayment of any Medicaid benefits paid by the state from any assets left in the trust upon the death of the individual. Often the amount of repayment can be in the hundreds of thousands of dollars, which means there is a strong possibility that nothing will be left to distribute to charity or loved ones from the remainder of the trust.

An ABLE account allows the special needs person to put money into an account they can manage (assuming they have capacity). A disabled person is only allowed to have one ABLE account. The amount which may be contributed to the account in any one year is limited to the annual gifting limit set by the IRS (currently $14,000 per year). The total amount that can go into the account is set by each state and is the same maximum that can be used to fund a 529 Plan in that state. Although it is possible to have more than $100,000 in an ABLE account, the excess over $100,000 would be countable for purposes of qualifying for SSI. Assets in the ABLE account grow income tax free.

Distributions from the ABLE account for “Qualifying Disability Expenses” (“QDE”) are income tax free and are not countable as “income” for eligibility purposes. Qualifying Disability Expenses are any expenses related to the special needs person as a result of their disabilities. These may include education, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which help improve health, independence, and/or quality of life. Some distributions for housing are not QDE. A distribution that does not qualify as QDE is subject to income tax and a 10% penalty. If there is any money left in the ABLE account at the death of the special needs person, it must be used to reimburse the state for the cost of Medicaid provided, as is with the case with a first party special needs trust.

The ABLE account is a great tool if the disabled beneficiary comes into a small amount of money. It can also be used to add flexibility to a first party or third party special needs trust, allowing the special needs person to have some control over some of the money to make QDE purchases. It also may be a great vehicle to hold required minimum distributions (“RMDs”) from an IRA that are payable to a special needs trust – causing the distributions to be taxed in much the same way as a conduit trust without the eligibility disadvantages that would otherwise be created by distributing the RMDs directly to the disabled person. While the ABLE account will not eliminate the need for special needs trusts as was hoped for by many advocates, there are many instances the ABLE account can work in conjunction with the special needs trust to achieve more flexibility and control for the beneficiary.

The attorneys at our firm are experienced in planning for persons with special needs. They are familiar with when an ABLE account would be desirable as the sole planning vehicle and when it can be used in conjunction with a special needs trust to meet the needs and desires of the special needs beneficiary. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding all types of special needs planning and estate planning strategies and tools.

Tom Clancy was a prolific scrivener of action novels. Upon his death at age 66, he left a substantial estate. His Will divided his estate into three shares – one share to his wife, one share for his wife to use during her life (with the remainder to go the daughter of their marriage), and one share to go to his children from previous relationships. Weeks before he passed away, Clancy executed a Codicil to his Will which included the following sentence: “No asset or proceeds of any assets shall be included in the Marital Share of the Non-Exempt Family residuary Trust as to which a marital deduction would not be allowed if included.”

Assets that are subject to the unlimited marital deduction are removed from the spouse’s estate and not subject to estate tax in the estate of the deceased spouse. At the death of the surviving spouse, these assets would be included in the surviving spouse’s estate and potentially subject to estate tax at that time. Clancy’s wife argued that this language meant the assets left to her outright and in trust qualified for the unlimited marital deduction and therefore are not subject to estate tax. If this interpretation is correct, only the assets of the third trust for the four children from previous relationships would be subject to estate tax in the amount of approximately $12 million.

The four children argued this interpretation was not correct and that the share held in trust for Clancy’s wife and his daughter with her should be included in Clancy’s estate. The increase in the size of estate would cause the estate tax to be increased to approximately $16 million. However, each share would be subject to one-half of the liability. So, if the wife’s interpretation is correct, the estate tax would be $12 million, but it would all be payable by the children. If the children’s interpretation is correct, the estate tax would be $16 million, but $8 million would be owed by the wife and $8 million owed by the children. Either way, the assets left to Clancy’s wife and in trust for her will be subject to estate tax in her estate when she passes away.

After years of litigation, recently a confidential settlement between the wife and children has been reached. We likely will never know how the tax liability was agreed to be split between the family members. We also don’t know whether the IRS will agree with this settlement or choose to challenge the family’s agreement. We do know there were substantial legal fees paid as the result of this ambiguity and that a rift has arisen in the family that may have been otherwise avoided had Clancy’s intent been more clearly expressed in his Codicil.

Litigation also arose in the estate of Bonnie Jean Pease. Approximately seven months before her death, while Bonnie was serving time in a penitentiary, she executed a holographic Will. A holographic Will is a Will that is typically drafted without the assistance of an attorney and is totally in the handwriting of the decedent. The Will disinherited her mother, her brother, Brian, and her sister, Beverly. The Will designated her friends Lisa and Lynn Schock as the executors of her estate. Her Will explained why she was disinheriting her mother, brother, and sister, indicated she wanted to leave a share for her remaining brother, Douglas, expressed her desire to leave funds for the care of her bird “Cocky,” and instructed the Schocks to use a share of the estate to fund litigation against South Dakota and the South Dakota Women’s Prison for injustices she believed had occurred.

Pease wrote as follows:

Hence, I give all my belongings to Lisa and Lynn Schock contingent on them giving a share to my brother Douglas Dean Hubert and for Cocky’s new keeper mom search, and making some arrangements for litigation start monies to correct injustices at SDWP in Pierre.

The probate court had an evidentiary hearing to interpret the Will. The court held that the Will appointed the Schocks as executors and the explanatory language combined with the specific devises – when read together – “indicate[d] no desire to give the Schocks anything.” The court ruled that Bonnie intended for the Schocks, as executors, to only provide for the care of her pet bird, to fund the litigation against the State and prison, and distribute the remainder to Douglas Hubert. The Schocks appealed, contending that the Will gives them a conditional gift. Furthermore, they contended the probate court disregarded the sentence in the Will stating: “I owe Lisa and Lynn Schock for their amazing precious support of me and Cocky from 2010 to and through the end of my life.”

The South Dakota Supreme Court reversed, holding that Bonnie intended to make a gift to the Schocks, provided they would give a share of the gift to Douglas and use a portion to fund the care for Cocky and the litigation. The court stated “[o]ur inquiry is limited to what the testator meant by what [she] said, not what we think the testator meant to say.” The court held the language unequivocally gives all of Bonnie’s belongings to the Schocks with further instructions as to what to do with the assets.

Sometimes the ambiguity in question is not in the Will or trust, but in the law governing administration of estates. Singer Prince died without any estate plan. His estate, estimated at $300 million, is tied up in litigation over the identity of his heirs. Shortly after his death, dozens of individuals came forward claiming to be related to Prince. DNA tests were done and none of the tests supported their claims. As a result, the judge denied their claims.

The remaining litigation pits Prince’s six recognized relatives against the daughter and granddaughter of Prince’s late “brother,” Duane J. Nelson, Jr. (“Junior”). Duane J. Nelson, Sr., Prince’s father, recognized Junior as his son, even though he was the child of someone else. Nelson, Sr. was named as father on Junior’s birth certificate. Nelson, Sr. called Junior his son, but he never adopted Junior, never lived together as parent and child, and never provided financial support for Junior during childhood.

The question remaining for the probate court is whether Minnesota law (where Prince lived at the time of his death) recognizes a non-genetically related “brother” (who was never adopted) as a valid heir. Junior’s relatives contend that a son is a son, even without the genetic relationship, as long as the father and son treated each other as parent and child. Prince’s recognized heirs argue that Minnesota law relating to the determination of heirs is limited to defined categories of genetic relationship, adoption, and births created by assistive technology. Minnesota law does contain defined categories where a parent-child relationship is clearly recognized, but does not clearly state that a parent-child relationship cannot be established otherwise. So the litigation continues.

All this estate litigation relating to ambiguity demonstrates that a proper estate plan should be drafted that clearly expresses the creator’s intent. The attorneys at our firm strive to assure that the Wills and trusts we draft clearly express the desires of our clients. We also encourage communication between family members so that our clients’ wishes do not come as a surprise to family members – or, where such communication is not possible, that our clients document their intent, desires, and reasoning behind decisions, so it can be later shown to family members. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding all types of estate litigation and ways to minimize such litigation. You can receive more information about a complimentary review of your clients’ estate plans by calling our office.

Fans of Young Frankenstein, Blazing Saddles, The Producers, and Willy Wonka were saddened by the death of Gene Wilder. Unlike others who die from Alzheimer’s disease, the comedian’s death was attributable entirely to this deadly disease. The fact is that Alzheimer’s disease is the real cause of death of millions of people, causing a slow death of the brain until the body succumbs, most often to contributing conditions such as pneumonia, sepsis, kidney failure or heart disease. Wilder’s family called the disease an “illness-pirate.” Alzheimer’s disease is the sixth leading cause of death in the United States. In fact, one out of three seniors die with Alzheimer’s or a related dementia.

An initial diagnosis of Alzheimer’s disease rarely results in an immediate determination that the individual lacks mental capacity. All indications are that, shortly after diagnosis of the illness, Wilder met with estate planning attorneys and other financial advisors who were not only familiar with planning for death, but also with planning for incapacity. It appears that plans were put in place to manage his financial affairs, most likely by his fourth wife, Karen Boyer, and his trusted and devoted nephew, Jordon Walker-Pearlman. Unlike celebrities such as Brooke Astor, Marlon Brando, Peter Falk, Etta James, and Casey Kasem, there has been no battle over Wilder’s assets, during life or after his death. This may have been in part because he had no natural children and a small family. But the fact he planned early and involved family in the process also may have also contributed to the positive results. Plans for incapacity planning generally involve powers of attorney and living trusts. Such planning also can involve complicated business succession planning in cases where business assets are involved. The comedian’s estate plan almost certainly included provisions for protecting the value of his public image and capturing the future wealth that will be derived from the resurgent interest in his many movies, books, and Broadway scripts.

In Wilder’s case, his planning almost certainly involved philanthropic planning to continue the legacy of his third wife, Gilda Radner, who died from undiagnosed ovarian cancer. After her untimely death, Wilder worked hard to promote cancer awareness and lobbied Congress for its support. He was instrumental in co-founding Gilda’s Club and founding the Gilda Radner Hereditary Cancer Program at Cedars-Sinai Medical Center in Los Angeles. James Schaffer wrote of Wilder’s efforts:

In our world of philanthropy, people with means sometimes seek to burnish their legacy with gifts that etch their names in granite. Wilder etched his name in our hearts and minds by his wonderful talent and his generous and principled actions. . . . For those fighting cancer and their family and friends, Wilder is the beloved benefactor and advocate whose Gilda Club helps them believe that love will see them through whatever may come.

Much of what is detailed above is speculation because the details of Wilder’s estate plan are not publicly known. He preferred to keep the diagnosis of his disease private while he was alive, but he instructed his family to make it public after his death. The lack of a probate proceeding after death indicates that Wilder likely employed the use of a living trust in his planning process. A properly drafted and funded living trust can keep your personal and financial affairs out of court and can keep the extent of your wealth private. The extent of Wilder’s wealth is unknown, but speculated to exceed $20 million. While the details of Wilder’s estate plan are not known, the current publicity of his battle with Alzheimer’s disease serves as a wake-up call for planning during the early stages of disease for those diagnosed with Alzheimer’s disease or other cognitive impairment. Planning while the person still has mental capacity and can still make legally binding decisions can go a long way in simplifying the management of financial affairs during life and minimizing the possibility of estate battles and family conflict after death. If a conflict is anticipated, evidence that the senior has capacity and is free from undue influence can be obtained in case it will be needed down the road.

Our firm is experienced in the many forms of disability planning and estate planning for persons diagnosed with Alzheimer’s disease and other forms of dementia. We can also assist for planning for the long-term care of a loved one with disabilities. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding financial and estate planning, special needs and disability planning and business succession strategies. We also have information about and can assist with charitable planning for those looking to benefit society in addition to their families. You can get more information about a complimentary review of long-term care for your clients by calling our office.